Invest Ed : investor protection kit : www.investedok.org

Investor Protection Kit
www.investedok.org
®
Contents
Invest Ed® Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Your Investment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Top 10 Fraud Scams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Oklahoma Fraud Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
“Investigate Before You Invest” Checklist . . . . . . . . . . . . . . . . . 10
How to Spot a Con Artist . . . . . . . . . . . . . . . . . . . . . . . . . 11
How to Avoid Becoming a Victim . . . . . . . . . . . . . . . . . . . . 12
Tips for Seniors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Investor Education Resources . . . . . . . . . . . . . . . . . . . . . . . 14
Quiz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
WWW.INVESTEDOK.ORG Invest Ed®
Education Programs
Invest Ed®
Documentary
Series
This powerful series profiles some of
Oklahoma’s most recent securities fraud
cases; portraying in detail each crime through
reenactments, victim interviews and in-depth
narration by actor Rex Linn. Each
documentary explores the con artists’ mind-set
and method in executing their scam. Visit
www.investedok.org for details.
“Anatomy of a Fraud: Catching a Con
in Pottawatomie County” (2004). This
28 minute documentary recounts the
multi-million dollar Ponzi scheme executed
by a father and son team from Shawnee,
Oklahoma.
“Anatomy of a Fraud: The Rogue Broker”
(2010). Subtitled the Mini Madoff, this second
documentary in the Invest Ed® series explores
how a respected local stock broker turns into
a Ponzi scam artist, how to avoid becoming
a victim and how the Oklahoma Securities
Commission enforcement division develops a
case. Narrated by Rex Linn. 26 minutes
“Anatomy of a Fraud: The Psychology of
a Fraud” (2011). The anatomy of a fraud
dissected from the mind-set of both the con
artist and the victim.
Project Director:
Lisa Angelotti
University of Oklahoma Outreach
Invest Ed®
Investment Minute
Radio & Television Series
and Investor Weekly
60 second nuggets of unbiased investment
basics and securities fraud prevention
information designed to increase investor
well-being through knowledge and securities
fraud awareness. The television and radio
series air statewide on select commercial
stations and are available on the Invest
Ed® Web site. Information from the
Investment Minute series is published in
select newspapers through the Investor
Weekly. Visit www.investedok.org for details
or Podcast downloads of all the Investment
Minutes series.
Project Director/Produ cer:
Lisa Angelotti
University of Oklahoma Outreach
Invest Ed® STARS
(Students Tracking
and Researching
the Stock Market)
The STARS project is an investment
education program for Oklahoma high
school students. STARS aligns with the PASS
Standards, and the State Department of
Education recognizes STARS as a resource
for HB 1476. Annually, eight Saturday
workshops train teachers to implement the
program. Students research, assess risk,
set goals, create and track online portfolios
and at the project’s conclusion write a
report. The required report component
differentiates this program from other
online portfolio programs. Program goals
include teaching students how to achieve
financial freedom and raising securities fraud
awareness. Additionally, the project sharpens
critical thinking, research and math skills and
provides practice in setting goals, meeting
deadlines and writing reports. Ripple-effect
benefits are numerous. Visit
www.investedok.org for details.
Project Director:
Jo Ann Murray
Project Assistant:
Amy Sanders
University of Oklahoma Outreach
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WWW.INVESTEDOK.ORG Invest Ed®
Education Programs
Invest Ed®
Teacher Institute and
Refresher Workshop
The Teacher Institute is a four-day summer
professional development program for high
school teachers. Subject matter experts
teach the basics of saving and investing and
related topics in addition to securities fraud
awareness and prevention. Teachers receive
access to optional investment education
curriculum. The Teacher Institute trains
teachers to implement the Invest Ed® STARS
program. Teachers learn how STARS meets
HB 1476 objectives. Oklahoma high school
teachers who have not attended a previous
Teacher Institute or Saturday STARS
workshop may register. Teacher Institutes are
free; materials, accommodations and meals
are provided by Invest Ed®.
Visit www.investedok.org for details.
The Refresher Workshop is a two-day summer
program offering support to high school
teachers who have participated in the Invest
Ed® STARS program. Subject matter experts
teach the basics of saving and investing and
related topics in addition to securities fraud
awareness and prevention. Teachers share
best practices. Teachers learn how the STARS
program meets HB 1476 objectives, and
they receive access to optional investment
education curriculum. Refresher Workshops
are free; materials, accommodations,
and meals are provided by Invest Ed®.
Participating teachers are invited by e-mail to
the two summer Refresher Workshops. Visit
www.investedok.org for details.
Project Director:
Jo Ann Murray
Project Assistant:
Amy Sanders
University of Oklahoma Outreach
Page 2
Education is Protection
Invest Ed® is a multi-faceted investor education
program made possible by the Oklahoma Securities
Commission. All programs are produced by the
University of Oklahoma Outreach.
For free, unbiased investor education resources or to
learn more about our programs visit www.investedok.
org. To contact us at the Oklahoma Securities
Commission, log on to www.securities.ok.gov or mail
your inquiry to the Oklahoma Securities Commission,
Invest Ed® Programs, Suite 860, First National Center,
120 N Robinson, Oklahoma City, OK. 73102.
www.investedok.org
The University of Oklahoma Outreach
Oklahoma Securities Commission
®
WWW.INVESTEDOK.ORG
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ORG YOUR INVESTMENT RIGHTS
Ask for and receive information from a
firm about the work history and background of
the person handling your account, as well as
information about the firm itself.
Receive complete information about the
risks, obligations and costs of any investment
before investing.
Receive recommendations consistent with
your financial needs and investment objectives.
Receive a copy of all completed account
forms and agreements, as well as account state-ments
that are accurate and understandable.
Understand the terms and conditions of
transactions you undertake.
Access your funds in a timely manner and
receive information about any restrictions or
limitations on access.
Discuss account problems with the
branch manager or compliance department of
the firm and receive prompt attention to and
fair consideration of your concerns.
Receive complete information about
commissions, sales charges, maintenance or
service charges, transaction or redemption fees
and penalties.
Contact your state or provincial securities
agency in order to verify the employment and
disciplinary history of a securities salesper-son
and the salesperson’s firm; find out if the
investment is permitted to be sold; or file a
complaint. You can find contact information
from the Oklahoma Securities Commission at
www.securities.ok.gov.
Investing in securities is risky enough without
worrying about whether your salesperson is going
to fleece you. To be an informed investor, you
must know what danger signs to look for. Some
are subtle, and some are easier to spot.
When You Invest, You Have the Right to:
To be an
informed
investor, you
must know
what danger
signs to
look for.
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WWW.INVESTEDOK.ORG TOP TEN FRAUD SCAMS
PONZI SCHEMES
Most securities frauds involve
some sort of Ponzi. The premise
is simple: use money from later
investors to pay early investors.
Inevitably, the schemes collapse
and the only people who
consistently make money are the
promoters who set the Ponzi in
motion. Recently the Oklahoma
Securities Commission broke
up massive Ponzi schemes
in Shawnee and Crescent,
Oklahoma.
UNREGISTERED
INDIVIDUALS
SELLING SECURITIES
Individuals who sell securities
or provide investment advice
are required to pass rigorous
examinations before they
can offer their services to the
public. Those who bypass this
requirement often are predators
offering bogus investments.
Unregistered people selling
unregistered securities should
be a red alert for investors. Con
artists also frequently use the
promise of high commissions
to lure some insurance agents,
investment advisers, accountants
and lawyers who are not
registered to sell securities
into selling investments they
may know little about, such
as bogus limited partnerships
or promissory notes. Even
investment products such
as variable annuities can be
fraudulently sold to unsuitable
and unsuspecting investors by
people not trained as securities
professionals.
UNREGISTERED
INVESTMENT
PRODUCTS
It pays to remember that
legitimate investment products,
excluding stocks sold on national
exchanges, must be registered
with state officials before they
can be offered for sale to the
public. Con artists bypass this
requirement because they know
that stringent state registration
requirements protect investors
from their offerings of viatical
settlements, pay telephone
and ATM leasing contracts,
promissory notes, investment
trusts and other unregistered
securities that cannot stand
the scrutiny of the registration
process. Most unregistered
investments promise “limited
or no risk” and high returns. In
almost all cases, the only profits
go to the promoters of these
schemes and investors are left
holding the bag.
AFFINITY FRAUD
Con artists increasingly target
religious, ethnic, cultural and
professional groups. Some may
be members of the group or
pretend to be members in order
to gain trust. Con artists often
recruit a respected member
of a community or religious
congregation to promote their
schemes by convincing them
that a fraudulent investment is
legitimate. In many cases, even
these leaders become victims
of what turns out to be a Ponzi
scheme.
SENIOR
INVESTMENT FRAUD
Because they have built a
lifetime of savings, seniors
continue to face investment
fraud by con artists peddling
unsecured promissory notes,
viatical settlements, variable
annuities and other investments
that are either fraudulent or
unsuitable for them based on
their financial needs. Some
victims are switched out of
existing investments into
others just for additional
sales commissions. California
securities regulators recently
derailed a “living trust mill”
scam involving insurance agents
acting as investment advisers
who misled and illegally pushed
seniors to sell securities and
buy annuities. Before doing
business with any investment
professional, all investors should
check with the Oklahoma
Securities Commission to
determine whether the
individual is properly licensed
and if there have been any
complaints or disciplinary
problems.
INVESTMENT
SEMINARS
Promoters of unsuitable
investments increasingly seek
potential investors, particularly
seniors, by offering seminars,
many of them promising a
free meal along with “higher
returns and little or no risk.”
Unfortunately, in many of the
Continued next page
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ORGWWW.INVESTEDOK.ORG TOP TEN FRAUD SCAMS
cases that securities regulators
see, it’s just the opposite:
high risk and no returns, just
disastrous losses.
INTERNET FRAUD:
PUMP and DUMP
SCAM
Securities fraud on the Internet
has taken an interesting and
dangerous turn. Increasing
complaints have been received
concerning “pump and dump”
cons using e-mail spam as the
pumping tool. Unsolicited
e-mails are sent over the Internet
that appear to be sent to you by
mistake. These e-mails contain
what appear to be factual insider
information favorable to the
value of the stock meant for a
friend or relation of the sender.
The inside info is false and the
sender holds the stock being
pumped up. Based on this false
information, the spammed buy
the stock sending the price
artificially up. Once the stock
rises in value, the con artist sells
their holdings and the price
of the stock drops leaving you
holding the bag.
UNSUITABLE
SALES
What might be a suitable
investment for one investor
might not be right for another.
Securities professionals must
know their customers’ financial
situation and refrain from
recommending investments that
they have reason to believe are
unsuitable. For example, variable
and equity indexed annuities
are often unsuitable for senior
citizens because of unreasonable
costs, fees and penalties for early
withdrawal. But sales agents
earn high commissions so they
do not always adhere to the
suitability standards – with dire
consequences for seniors.
OIL AND GAS
SCAMS
With the high price of oil
and ongoing instability in the
Middle East, NASAA members
are concerned that con artists
will dust off a variety of oil
and gas scams once prevalent
in the 1980s to lure investors
into unsuitable or fraudulent
investments, scams ranging from
leases in oil fields to unproven
technologies designed to convert
common substances into fuel.
In Oklahoma, regulators have
filed civil charges against a
Duncan-based company that
received money from investors in
six states for the recompilation
of one well that had been
depleted for years and another
well the company did not own.
The department has brought
administrative proceedings
against at least four other
companies for violations of
the registration and anti-fraud
provisions of securities laws
relating to a range of material
misstatements and omissions.
PRIME BANK
SCAMS
A favorite of con artists who
promise investors triple-digit
returns through access to the
investment portfolios of the
world’s elite banks. The negative
publicity attached to these
schemes has caused promoters in
recent cases to avoid explicitly
referring to “prime banks.” Now
it is common to avoid the term
altogether and underplay the
role of banks by referring to these
schemes as “risk free guaranteed
high yield instruments” or
something 7 equally deceptive.
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Page 6
Matthew McClintock
In early 2003, Matthew McClintock
promoted himself to potential investors
as a day trader who would trade funds
aggressively in order to make quick profits.
He met most of his victims through online
dating services and after gaining their trust,
received substantial sums of money under
the ruse that he would make securities
transactions. However, he used some of
the funds to actively trade securities on
his personal account at AmeriTrade with
the remaining funds going for personal
expenses. McClintock was not registered to
transact business in this manner.
McClintock met a woman over the
Internet who lived in Tennessee. The two
became engaged and McClintock moved
in with her. She was a state employee
and was eligible for retirement in June
2005. McClintock urged her to take her
retirement in one lump sum; he convinced
her that he could invest that money for
her. In addition, he began teaching a day
trading course out of her home to her
friends.
The woman’s coworkers became suspicious
of him and eventually contacted the FBI.
When an agent informed the victim that
McClintock was out on bail for obtaining
money under false pretenses in Grady
County, and that the Oklahoma Securities
Commission had taken action against
him for selling unregistered securities and
committing fraud, she kicked him out. He
then attempted to partner with the ex-wife
of a bank president in order to funnel
money through her bank account. She is
now a witness for the case.
Currently he is serving a four-year
suspended sentence in Grady County
for obtaining services by fraud. A bench
warrant was issued for his arrest after
he failed to appear in May 2005 for a
probation violation and McClintock is
now being held in Tennessee on charges of
obtaining money under false pretenses. He
has waived extradition to Oklahoma, but it
is unclear when he will be transferred back
to the state.
Merl William
“Bill” Hickman, Sr.
Merl William
“Bill” Hickman, Jr.
This father and son team
swindled millions from mostly
retired and elderly investors
through their Shawnee-based insurance
company, the Hickman Agency.
The activities of the Hickmans came to
the attention of officials at the Oklahoma
Securities Commission during the summer
of 2003 when a soon-to-retire Tinker Air
Force Base employee called, skeptical of an
investment opportunity with the agency.
State officials seized the family’s assets and
shut down the business Dec. 17, 2003.
According to court records, approximately
160 investors have lost more than
$8 million through a Ponzi scheme.
Investors were told they had the
opportunity to receive a 20 percent return
on their investment with the Hickmans,
with the offer to receive monthly payments.
Once the civil case was filed and a receiver
was appointed, it became clear that the
Hickmans did not invest the funds, instead
they used them to pay for a lavish
lifestyle. Investigators found boats,
recreational vehicles, a Hummer, flat
screen, plasma televisions, tanning beds,
guns, stainless steel appliances and nearly
$1 million in jewelry. Additionally,
the Hickmans took trips to Las Vegas,
purchased land and funded home
remodeling projects.
Currently, Hickman Sr., is serving an eight-year
federal prison term to be followed by a
160-year state prison sentence.
Hickman Jr., is serving a five-year federal
prison term which will be followed by
a 10-year state prison sentence on local
conspiracy charges.
Both were ordered to pay approximately
$8.5 million in restitution at the federal
level.
Victims are expected to receive between
a five and 10-cent return on the dollar
following the liquidation of the Hickman
assets.
Oklahoma Fraud Cases continued next page
Page 7
Department
of Securities
The mission of the Oklahoma
Securities Commission is investor
protection through the administration and
enforcement of the Oklahoma Uniform
Securities Act of 2004, an act prohibiting
fraud in securities transactions and
requiring the registration of broker-dealers,
agents, investment advisers and investment
adviser representatives and the registration
of securities.
The duties of the Department of Securities
consist of receiving and processing
applications for registration or exemption of
securities, business opportunities, takeovers
and subdivided land offered in and/or from
the state of Oklahoma, including reviewing
the offering documents and sales material
to be used; receiving and processing
applications for licensing of broker-dealers,
agents, investment advisers and investment
adviser representatives; periodic on-site
examining of registrants for compliance
with the applicable acts; disseminating
information through public lectures,
programs, correspondence and the press,
so that professional groups and the public
at large may become better acquainted
with the requirements and provisions of
the acts subject to the jurisdiction of the
department; investigating complaints
concerning the offer and/or sale of
securities, business opportunities and
subdivided land; taking administrative
actions upon notice of violations of the
acts; taking civil action where necessary;
making criminal referrals to appropriate law
enforcement officials, and/or by assisting
in such prosecutions. The department
also receives filings of the final documents
for bonds, notes or other evidences of
indebtedness of any public trust.
From 2000 to mid-October 2004
Marsha Schubert of Crescent
accepted money from investors
through her company, Schubert and
Associates, under the pretense that she
would invest the funds as a day trader.
Of these funds, less than one percent was
invested. Schubert provided no authentic
monthly or quarterly statements to
investors, although she did provide false
statements to some investors.
Bank accounts with multiple names were
established in Crescent and Kingfisher.
More than $200 million flowed through
the accounts during the life of the scam.
Using a classic Ponzi scheme, payments
were made, purportedly generated through
investment activities while in truth,
these payments were made using other
investors’ money.
Victims were spread across Oklahoma,
Texas and Arkansas and included
teachers, physicians, bankers, farmers and
ranchers. Investors were obtained by word
of mouth and personal referrals.
Schubert, a registered stockbroker, is a
lifelong resident of Crescent and was
considered a model citizen. She was
married to Richard Schubert for 30 years
and they had three children. He has since
divorced her.
While her lifestyle remained modest,
Schubert paid off a home mortgage,
purchased mobile homes for her children,
buildings for her businesses, including a
knick-knack store called Kattails, and a
luxury condominium in Branson, Mo.
In May 2005, Schubert pleaded guilty on
all state and federal charges against her.
In September 2005, Schubert was
sentenced to 10 years in federal prison
and 25 years in state prison, to be served
concurrently. She turned herself over to
federal custody Sept. 30, 2005.
Marsha Schubert
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WWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
Mark A. Wingo
Between 1992 and 1999, Tulsa
resident Mark A. Wingo filed
for bankruptcy protection on
four separate occasions and accumulated
numerous tax liens and judgments
against him.
Wingo was convicted in 1988 of two state
counts relating to motor vehicle larceny.
Wingo received a five year sentence
of which he served approximately six
months. He was on probation for the
remainder of his sentence.
In 1995, Wingo was indicted on federal
charges relating to possession of a firearm
after a felony conviction for which he
received a sentence of 20 months in
prison and three years’ supervised release.
While under supervised release, Wingo
was arrested on bogus check charges
in connection with more than one
motor vehicle purchase. His supervised
release status was eventually revoked
and he began serving time in a federal
correctional facility in 1999. While
incarcerated, Wingo faced another charge
for uttering a forged security and a charge
for escape. He pled guilty to the two new
charges and was sentenced to 40 months
in prison, with three years supervised
release. He was released from prison in
June of 2005, subject to the supervision of
a federal probation officer.
While under supervised release, Wingo
offered and sold shares of stock in
Airgonomics, Inc., an Oklahoma
corporation formed by Wingo in July of
2007. The purported business plan of
Airgonomics was to develop technology
to power or charge the batteries of hybrid
gasoline/electric cars. Wingo sold the
stock for $75 per share.
Fearing that potential investors would not
invest with him, Wingo did not disclose
his personal financial history or the fact
that he is a convicted felon. Wingo did
represent that he had filed for a patent
for his technology and provided potential
investors with a purported patent
application filing number. Wingo also
disclosed the name of an attorney with
whom he claimed to be working with to
obtain the patent. In addition, Wingo
represented that he was working on the
development of the technology with at
least two engineers associated with the
Engineering Department at Oklahoma
State University.
At least one Oklahoma resident invested
in Airgonomics without verifying any of
the information provided by Wingo. Only
after making the investment and upon
learning of Wingo’s criminal history did
the investor conduct any due diligence
regarding Airgonomics or Wingo. The
investor contacted representatives of
Oklahoma State University (OSU) only
to learn that there was no agreement
or relationship between Airgonomics
and any OSU professor. The investor
contacted the attorney referenced by
Wingo and discovered that the attorney
had met with Wingo only once, that
the attorney never prepared a patent
application on behalf of Airgonomics, and
that the number referenced by Wingo was
merely the law firm’s internal case number
for the Airgonomics matter and not a
patent filing number.
Wingo did not use the investment
proceeds as he represented to
the investors.
Phillip Raglin
Phillip Raglin and Joe Layne are
in their early 20s, both graduates
of Wagoner High School in
Wagoner, Oklahoma. Neither Raglin nor
Layne graduated from college. Raglin
was a popular guy, considered by many
in the community to be extremely
bright. Layne, Raglin’s sidekick, is the
son of a local Baptist preacher. At the
time in question, Layne’s father was the
president of the Wagoner School Board.
Together, using family ties, friends and
other relationships, Raglin and Layne
orchestrated a fraudulent investment
scheme through meetings in potential
investors’ homes and offices or in local
restaurants. The two collected in excess
of $1,000,000 over a very short period of
time from approximately 300 residents
of northeast Oklahoma, Arkansas and
Missouri.
The basis of the fraudulent scheme was a
“unique” investment formula developed
by Raglin for which a “patent was
pending.” Raglin talked of earnings of
3-5% per day and touted the formula as
eliminating the greed and fear associated
with investing in the securities markets.
The formula automatically sold a stock
position when the investment reached
a return of 5% in a day or when a loss
of a minimal programmed percentage
occurred. Raglin claimed he started
investing with $150,000 in “business
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ORGWWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
loans” used to fund his activities which
originally came from large student loans.
Raglin boasted that he earned returns of
80% per month on that original $150,000
by using his “unique” investment
formula.
Raglin Industries, LLC was formed
to share the wealth with those who
do not have a net worth of at least
$1,000,000 and an annual income of
at least $200,000 as a single person
or an annual joint income of at least
$300,000. Raglin and Layne offered and
sold memberships in Raglin Industries to
investors with promises of 30% interest
on their investments and a guaranteed
share in company profits. Raglin boasted
that a $100 investment would grow to
$2,300 after one year, $54,000 at the end
of year 2, and $1.2 million at the end of
year 3, if all profits were reinvested in
Raglin Industries rather than taken as
cash distributions. Raglin told stories
of investing six days a week in the
securities markets in China, Australia
and Panama, and the purchase of Subway
franchises in Estonia and Bulgaria. The
initial members of Raglin Industries were
also tempted by additional “benefits of
membership”: health, dental and vision
insurance for the member’s family with a
maximum premium of $300 and reduced
co-payments, a destination vacation club,
mortgage services with interest rates
below prime, college scholarships and
special discounts on purchases.
Sound too good to be true? It was!
There was no “unique” investment
formula or strategy. There was no patent
application pending. There were no
80% per month investment returns.
There was no office and there were no
employees of Raglin Industries, LLC.
There were no investments made in the
securities markets in the United States,
China, Australia or Panama. Rather, the
investment proceeds were used to build
a home for Raglin and his new bride; to
purchase several expensive vehicles, at
least one of which was customized with
a computer, television and stereo at a
cost of $60,000; to fund travel expenses;
to pay ordinary and extraordinary living
expenses; and to pay token returns to
prior investors.
Travis Winnett
Over a period of seven months in
late 2006 and early 2007, Travis
Winnett, formerly of Catoosa,
Oklahoma, and now of Neosho, Missouri,
defrauded approximately ten Oklahoma
and Texas citizens out of $700,000.
Winnett offered and sold securities as
part of two “Loan Financing Savings
Plans” advertised by an entity called
American Liberty Insurance & Financial
Services. The investors’ monies
were to be held in an interest bearing
account until used to fund life insurance
premiums. Winnett falsely advertised
that the savings plans were offered “in
cooperation with” a bank located in
Claremore, Oklahoma. In order to
bolster the legitimacy of the purported
investment opportunity, Winnett
included the bank logo and the name
and telephone number of a customer
service representative of the bank on the
advertising materials.
Winnett was not registered in any
capacity under Oklahoma’s securities
laws. Winnett, an Oklahoma licensed
insurance agent at the time, offered a
“5x8” savings plan and a “6x10” plan.
Winnett’s “5x8” plan purportedly paid
simple interest of 8% per year for each
of five years. The “6x10” savings plan
purportedly paid simple interest of 10%
for each of six years plus a 15% “end-of-contract”
bonus for an initial deposit of
$25,000 and a 30% bonus for an initial
deposit of $50,000 or more. Winnett
represented to each investor that his/her
money would be deposited into an FDIC-insured
savings account at the Claremore
bank and that the money would be
insured for up to $100,000.
Investors were directed to make their
checks payable to Lighthouse Marketing
Incorporated, not American Liberty
Insurance & Financial Services or the
Claremore bank. Winnett deposited
over $700,000 of investors’ monies into
a single non-interest bearing account
that he controlled under the name of
Lighthouse Marketing. Separate bank
accounts were not established in the
name of each investor. Winnett used
the Lighthouse Marketing account solely
to pay his personal expenses. None of
the investors’ monies was invested and
Winnett did not otherwise have the
financial ability to pay the promised
interest and/or bonuses to his investors.
Various insurance agents recommended
the savings plan investments to their
clients – clients with whom they had
long-term business relationships.
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WWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
Neither the insurance agents making
the recommendations nor their clients
performed any due diligence on the
investment opportunity before any money
was invested with Winnett.
• The insurance agents and their
investing clients did not question the
promised 8% and 10% interest rates at
a time when banks were paying less
on certificates of deposit or
savings accounts.
• No one called the Claremore bank to
confirm a business relationship between
the bank and American Liberty
Insurance & Financial Services or
Travis Winnett.
• No one called the Claremore bank to
confirm whether a bank account would
be established in the individual
investor’s name.
• No one questioned the fact that their
checks were to be made payable to a
third entity not previously mentioned in
the advertising materials.
• No one questioned that the other
party to the investment agreement was
yet another previously undisclosed
entity, American Liberty Funding LLC.
“Investigate Before You Invest”
Knowledge is power. The following checklist is designed as a quick reference to
help investors ask the right questions before making an investment. Once your
questions have been answered, contact your state securities regulator or other
appropriate state agency, to verify the information.
Remember: The time to ask questions is before you invest
your hard-earned money.
Seller/Agent Information
Seller/Agent Name:
Company/Business Name:
Company/Business Address:
Phone Number:
Today’s Date:
1. What products are you offering? (check all that apply)
q Annuities
q Living Trust
q Accounting
2. Who regulates or licenses this product or service?
3. How does this product meet my investment objectives?
4. What are the risks?
5. What written information will I receive about this investment
before making a decision?
q Prospectus
q Most Recent Annual Report
q Recent News Releases
6. What license(s) do you hold that authorizes you to sell this product or service?
LICENSE TYPE
Insurance License
Securities License
Investment Advisor
State Bar License
Accountant License
Real Estate License
Other
q Securities
q Estate Planning
q Other
q Offering Memorandum
q Most Recent Quarterly or Interim Report
q Research Reports
LICENSE INFORMATION
License No:
CRD No:
License No:
q Corporation q SEC
State Bar No:
CPA No:
DRE License No:
Explain:
WWW.INVESTEDOK.ORG HOW TO SPOT A CON ARTIST
Rule 1:
Con Artists Like to Blend In
Rule 2:
Con Artists Dress for Success
Rule 3:
Con Artists Often Push Poorly
Understood or Little-Known Products
Rule 4:
Con Artists Bring Out the Worst in
You
Rule 5:
Con Artists Are Fair-weather Friends
Rule 6:
For Every Silver Lining,
There Is a Cloud
Rule 7:
Don’t be Afraid to “Sleep on It.”
Trust your inner voice if
you hear claims like these:
— “I just got a hot tip from an inside
source that this stock will go through the
roof.”
— “Your return is guaranteed. There’s no
way you can lose money.”
— “Gotta get in on the ground floor now
or you’ll be left out in the cold. In fact,
we’ll send a messenger over tomorrow
to pick up your check.” (Con artists
often use this device to avoid federal
mail fraud charges.)
— “This deal is so great, I invested in it
myself.”
— “If this doesn’t perform as I just said,
we’ll refund your money, no questions
asked.”
— “Everyone else that invested in this did
very well.”
Be especially careful if the
salesperson denies that risk
exists
Con artists usually are not very good
at answering important questions.
Watch out if the salesperson is
reluctant to provide information
on the following:
— The background, educational history
and work experience of the deal’s
promoters, principals or general
partners;
— Information on whether your investment
monies will be segregated from other
funds available to the business;
— Written information on the business’
financial condition, such as a balance
sheet and bank references;
— The prior track record of the business
and its principals;
— The salesperson’s name, where he or
she is calling from, who he or she works
for, his or her background and what
commission or other compensation he or
she will receive;
— The salesperson’s connection with the
venture and any affiliates.
In addition, be wary if the salesperson
doesn’t ask you questions about your
past investment experience and your
ability to withstand risk. Even if the
salesperson does ask a few related
questions, take heed if you get the
sense that he or she is merely going
through the motions.
Be especially careful
if the salesperson denies
that risk exists.
Page 11
WWW.INVESTEDOK.ORG
HOW TO AVOID BECOMING A VICTIM
Contact your state or provincial
securities regulator to see if the
investment vehicle and the person
selling it are registered. Your state or
provincial securities regulator will also
be able to tell you if the salesperson has
a disciplinary history, that is, whether
any civil, criminal or administrative
proceedings have been brought against
him or her.
Deal only with financial advisers,
broker-dealers or financial institutions
having a proven track record.
Ask for written information
on the investment product and the
business. Such information, including
financial data on the company and
the risks involved in the investment,
is contained in a prospectus. Read it
carefully.
Don’t take everything you hear
or read at face value. Ask questions
if you don’t understand and do some
sleuthing for yourself. If you need
help in evaluating the investment, go
to someone independent whom you
can trust such as an attorney or an
accountant.
Contact your local Better Business
Bureau to see if any complaints
have been filed against the venture’s
promoters or principals.
Steer clear of investments touted
with no downside or risk.
Avoiding
being hurt by a con artist
is as easy as
doing your homework–
before you invest.
Page 12
WWW.INVESTEDOK.ORG TIPS FOR SENIORS
Source: National American Securities Administrators Association
1
Don’t be a courtesy victim.
Con artists will not hesitate to exploit your
good manners. Save your good manners for
friends and family members, not strangers
looking for a quick buck!
2
Check out strangers
touting strange deals.
Trusting strangers is a mistake anyone
can make when it comes to their per-sonal
finances. Say “no” to any investment
professional who presses you to make an
immediate decision, giving you no opportu-nity
to check out the salesperson, firm and
the investment opportunity itself. Exten-sive
background information on investment
salespeople and firms is available from the
Central Registration Depository (CRD)
files available from the Oklahoma Securi-ties
Commission.
3
Always stay in
charge of your money.
Beware of anyone who suggests invest-ing
your money into something you don’t
understand or who urges that you leave
everything in his or her hands.
4
Don’t judge
a book by its cover.
Successful con artists sound and look
extremely professional and have the ability
to make even the flimsiest investment deal
sound as safe and sound as putting money
in the bank. The sound of a voice, particu-larly
on the phone, has no bearing on the
soundness of an investment opportunity.
5
Watch out for salespeople
who prey on your fears.
Con artists know that you worry about out-living
your savings or seeing your financial
resources vanish overnight as the result of
a catastrophic event, such as a costly hospital-ization.
Fear can cloud your good judgment.
An investment that is right for you will
make sense because you understand it and
feel comfortable with the risk involved.
6
Don’t compound tragedy
with rash financial decisions.
The death or hospitalization of a spouse
has many sad consequences - financial
fraud shouldn’t be one of them. Ask a con
artist to describe his ideal victim and you
are likely to hear the following two words:
“elderly widow.” If you find yourself sud-denly
in charge of your own finances, get
the facts before you make any decisions.
Local libraries and universities may offer
classes and information on investing. Talk
to friends, family, trade organizations and
state or provincial securities regulators for
advice. An insurance settlement makes you
an ideal target for fraud. Arm yourself with
information and your confidence will send
con men running.
7
Monitor your investments
and ask tough questions.
Don’t compound the mistake of trusting an
unscrupulous investment professional or
outright con artist by failing to keep an eye
on the progress of your investment. Insist
on regular written reports. Look for signs of
excessive or unauthorized trading of your
funds. Don’t let a false sense of friendship
or trust keep you from demanding a routine
statement of your accounts.
8
Look for trouble
retrieving your principal
or cashing out profits.
If a stockbroker, financial planner or other
individual with whom you have invested
stalls you when you want to pull out your
principal or profits; you have uncovered
someone who wants to cheat you. Some
investments have periods when you cannot
withdraw your funds, but you must be made
aware of these restrictions before you invest.
9
Don’t let embarrassment or
fear keep you from reporting
investment fraud or abuse.
Con artists know that you might hesitate
to report that you have been victimized in
financial schemes out of embarrassment or
fear. Con artists prey on your sensitivities
and count on these fears, preventing or
delaying the point at which authorities are
notified of a scam. Every day that you delay
reporting fraud or abuse is one more day
that the con artist is spending your money
and finding new victims.
10
Beware of “reload” scams.
If you are already the victim of an invest-ment
scam, don’t compound the damage
by letting con artists “reload” your assets.
Con artists know you have a finite amount
of money. Faced with a loss of funds, some
seniors who have been victimized once will
go along with another scheme in which the
con artists promise to make good on the
original funds lost and possibly even gener-ate
new returns beyond those originally
promised. Making up lost financial ground
is understandable, but often the result is
that you lose whatever savings you had left
in the wake of the initial scam.
Page 13
WWW.INVESTEDOK.ORG
INVESTOR EDUCATION
RESOURCES
• Oklahoma Securities Commission (OSC)
Suite 860, First National Center
120 N. Robinson
Oklahoma City, OK 73102
Phone: (405) 280-7700
Fax: (405) 280-7742
www.securities.ok.gov
• Invest Ed®
OSC Investor Education Program
Phone: (405) 280-7700
www.investedok.org
OTHER RESOURCES • AARP
Phone: (888) 687-2277
www.aarp.org
• Investor Protection Trust (IPT)
Suite 300
919 Eighteenth Street NW
Washington, DC 20006-5517
Email: iptinfo@investorprotection.org
www.investorprotection.org
• Financial Industry Regulatory Authority (FINRA)
Phone: (504) 522-6527
Fax: (504) 522-4077
District 5: Alabama, Arkansas, Louisiana,
Mississippi, Oklahoma and Tennessee
www.finra.org
Page 14
®
WWW.INVESTEDOK.ORG
• The National Fraud Information Center (NFIC)
www.fraud.org
• National Futures Association (NFA)
Phone: (212) 608-8660
www.nfa.futures.org
• The National White Collar Crime Center (NW3C)
10900 Nuckols Road, Suite 325
Glen Allen, VA 23060
www.nw3c.org
• North American Securities Administrators Association
Phone: (202) 737-0900
www.nasaa.org
• Securities Investor Protection Corporation (SIPC)
Phone: (202) 371-8300
www.sipc.org
• Securities and Exchange Commission (SEC)
Phone: 1-800-732-0330
Complaint Center: 1-202-551-6551
Investor Education Publications: www.sec.gov/investor/pubs.html
www.sec.gov
• Better Business Bureau
BBB of Central Oklahoma
Phone: (405) 239-6081
Fax: (405) 235-5891
Email: info@oklahomacity.bbb.org
www.oklahomacity.bbb.org
OTHER RESOURCES
Page 15
WWW.INVESTEDOK.ORG
Page 16
1. Which of the following phrases should raise your concern
about an investment?
a. High rate of return
b. Risk-free
c. Your investment is guaranteed against loss
d. You must invest now
e. All of the above
2. Securities laws protect investors by requiring companies to:
a. Show profits before they can sell stock
b. Provide investors with specific information
about the company
c. Pay dividends
d. Repay investors who have lost money
3. A fellow book club member tells you about an investment
opportunity that has earned returns of 20% during the past
year. Your investments have been performing poorly and you’re
interested in earning higher returns. This person is your friend and
you trust them. What should you do?
a. Ask your friend for more information about the
investment so that you can understand the risks before
you make a decision
b. Invest only a small amount to see how things go before
making a larger investment
c. Call your securities regulator to see if the investment
has been registered or is properly exempted for sale
d. a and c
4. Which of the following should you rely upon when making an
investment decision?
a. Testimonials of other investors
b. Advertisements and news stories in the media or
on the Internet
c. Technical data that you don’t really understand
d. Information filed with your securities regulator
5. Ways to protect yourself from investment fraud include:
a. Read all disclosure documents about an investment
b. Seek advice from an independent and objective source
c. Be skeptical and ask questions
d. Never write the check for an investment in the name
of your salesperson
e. All of the above
6. Which of the following are frequently used to defraud
the public?
a. Short-term promissory notes
b. Prime bank investments
c. Offshore investments to avoid taxes
d. Nigerian advance fee letters
e. All of the above
7. The role of government securities regulators is to:
a. Sell shares to investors
b. Act as an association for securities dealers and advisers
c. Regulate securities markets, the investment industry
and protect investors
d. All of the above
8. An investment is likely to be legitimate if:
a. The promotional materials and company Web site look
professional
b. The company has a prestigious office location
c. Other investors are receiving quick up-front returns
d. The company has an official-sounding name
e. None of the above
9. Who insures you against investment losses?
a. No one; this is the risk you take when you invest
b. My securities regulator
c. The company selling the investment
d. The Securities Investor Protection Corporation (SIPC)
in United States or the Canadian Investor Protection
Fund (CIPF) in Canada
AWARENESS QUIZ
Answer Key
1. E; 2. B; 3. D; 4. D; 5. E; 6. E; 7. C; 8. E; 9. A
Approximately 90 percent of all inquiries and
complaints made to or by the Oklahoma Securities
Commission became active enforcement cases.
More than 100 inquiries and complaints are
received annually. All cases are investigated for
securities fraud.
www.investedok.org
WWW. INVESTEDOK.ORG
All programs are made possible by the Oklahoma Securities Commission and are produced
by the University of Oklahoma Outreach, College of Continuing Education.
Education is Protection

Click tabs to swap between content that is broken into logical sections.

Investor Protection Kit
www.investedok.org
®
Contents
Invest Ed® Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Your Investment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Top 10 Fraud Scams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Oklahoma Fraud Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
“Investigate Before You Invest” Checklist . . . . . . . . . . . . . . . . . 10
How to Spot a Con Artist . . . . . . . . . . . . . . . . . . . . . . . . . 11
How to Avoid Becoming a Victim . . . . . . . . . . . . . . . . . . . . 12
Tips for Seniors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Investor Education Resources . . . . . . . . . . . . . . . . . . . . . . . 14
Quiz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
WWW.INVESTEDOK.ORG Invest Ed®
Education Programs
Invest Ed®
Documentary
Series
This powerful series profiles some of
Oklahoma’s most recent securities fraud
cases; portraying in detail each crime through
reenactments, victim interviews and in-depth
narration by actor Rex Linn. Each
documentary explores the con artists’ mind-set
and method in executing their scam. Visit
www.investedok.org for details.
“Anatomy of a Fraud: Catching a Con
in Pottawatomie County” (2004). This
28 minute documentary recounts the
multi-million dollar Ponzi scheme executed
by a father and son team from Shawnee,
Oklahoma.
“Anatomy of a Fraud: The Rogue Broker”
(2010). Subtitled the Mini Madoff, this second
documentary in the Invest Ed® series explores
how a respected local stock broker turns into
a Ponzi scam artist, how to avoid becoming
a victim and how the Oklahoma Securities
Commission enforcement division develops a
case. Narrated by Rex Linn. 26 minutes
“Anatomy of a Fraud: The Psychology of
a Fraud” (2011). The anatomy of a fraud
dissected from the mind-set of both the con
artist and the victim.
Project Director:
Lisa Angelotti
University of Oklahoma Outreach
Invest Ed®
Investment Minute
Radio & Television Series
and Investor Weekly
60 second nuggets of unbiased investment
basics and securities fraud prevention
information designed to increase investor
well-being through knowledge and securities
fraud awareness. The television and radio
series air statewide on select commercial
stations and are available on the Invest
Ed® Web site. Information from the
Investment Minute series is published in
select newspapers through the Investor
Weekly. Visit www.investedok.org for details
or Podcast downloads of all the Investment
Minutes series.
Project Director/Produ cer:
Lisa Angelotti
University of Oklahoma Outreach
Invest Ed® STARS
(Students Tracking
and Researching
the Stock Market)
The STARS project is an investment
education program for Oklahoma high
school students. STARS aligns with the PASS
Standards, and the State Department of
Education recognizes STARS as a resource
for HB 1476. Annually, eight Saturday
workshops train teachers to implement the
program. Students research, assess risk,
set goals, create and track online portfolios
and at the project’s conclusion write a
report. The required report component
differentiates this program from other
online portfolio programs. Program goals
include teaching students how to achieve
financial freedom and raising securities fraud
awareness. Additionally, the project sharpens
critical thinking, research and math skills and
provides practice in setting goals, meeting
deadlines and writing reports. Ripple-effect
benefits are numerous. Visit
www.investedok.org for details.
Project Director:
Jo Ann Murray
Project Assistant:
Amy Sanders
University of Oklahoma Outreach
Page 1
WWW.INVESTEDOK.ORG Invest Ed®
Education Programs
Invest Ed®
Teacher Institute and
Refresher Workshop
The Teacher Institute is a four-day summer
professional development program for high
school teachers. Subject matter experts
teach the basics of saving and investing and
related topics in addition to securities fraud
awareness and prevention. Teachers receive
access to optional investment education
curriculum. The Teacher Institute trains
teachers to implement the Invest Ed® STARS
program. Teachers learn how STARS meets
HB 1476 objectives. Oklahoma high school
teachers who have not attended a previous
Teacher Institute or Saturday STARS
workshop may register. Teacher Institutes are
free; materials, accommodations and meals
are provided by Invest Ed®.
Visit www.investedok.org for details.
The Refresher Workshop is a two-day summer
program offering support to high school
teachers who have participated in the Invest
Ed® STARS program. Subject matter experts
teach the basics of saving and investing and
related topics in addition to securities fraud
awareness and prevention. Teachers share
best practices. Teachers learn how the STARS
program meets HB 1476 objectives, and
they receive access to optional investment
education curriculum. Refresher Workshops
are free; materials, accommodations,
and meals are provided by Invest Ed®.
Participating teachers are invited by e-mail to
the two summer Refresher Workshops. Visit
www.investedok.org for details.
Project Director:
Jo Ann Murray
Project Assistant:
Amy Sanders
University of Oklahoma Outreach
Page 2
Education is Protection
Invest Ed® is a multi-faceted investor education
program made possible by the Oklahoma Securities
Commission. All programs are produced by the
University of Oklahoma Outreach.
For free, unbiased investor education resources or to
learn more about our programs visit www.investedok.
org. To contact us at the Oklahoma Securities
Commission, log on to www.securities.ok.gov or mail
your inquiry to the Oklahoma Securities Commission,
Invest Ed® Programs, Suite 860, First National Center,
120 N Robinson, Oklahoma City, OK. 73102.
www.investedok.org
The University of Oklahoma Outreach
Oklahoma Securities Commission
®
WWW.INVESTEDOK.ORG
Page 3
ORG YOUR INVESTMENT RIGHTS
Ask for and receive information from a
firm about the work history and background of
the person handling your account, as well as
information about the firm itself.
Receive complete information about the
risks, obligations and costs of any investment
before investing.
Receive recommendations consistent with
your financial needs and investment objectives.
Receive a copy of all completed account
forms and agreements, as well as account state-ments
that are accurate and understandable.
Understand the terms and conditions of
transactions you undertake.
Access your funds in a timely manner and
receive information about any restrictions or
limitations on access.
Discuss account problems with the
branch manager or compliance department of
the firm and receive prompt attention to and
fair consideration of your concerns.
Receive complete information about
commissions, sales charges, maintenance or
service charges, transaction or redemption fees
and penalties.
Contact your state or provincial securities
agency in order to verify the employment and
disciplinary history of a securities salesper-son
and the salesperson’s firm; find out if the
investment is permitted to be sold; or file a
complaint. You can find contact information
from the Oklahoma Securities Commission at
www.securities.ok.gov.
Investing in securities is risky enough without
worrying about whether your salesperson is going
to fleece you. To be an informed investor, you
must know what danger signs to look for. Some
are subtle, and some are easier to spot.
When You Invest, You Have the Right to:
To be an
informed
investor, you
must know
what danger
signs to
look for.
Page 4
WWW.INVESTEDOK.ORG TOP TEN FRAUD SCAMS
PONZI SCHEMES
Most securities frauds involve
some sort of Ponzi. The premise
is simple: use money from later
investors to pay early investors.
Inevitably, the schemes collapse
and the only people who
consistently make money are the
promoters who set the Ponzi in
motion. Recently the Oklahoma
Securities Commission broke
up massive Ponzi schemes
in Shawnee and Crescent,
Oklahoma.
UNREGISTERED
INDIVIDUALS
SELLING SECURITIES
Individuals who sell securities
or provide investment advice
are required to pass rigorous
examinations before they
can offer their services to the
public. Those who bypass this
requirement often are predators
offering bogus investments.
Unregistered people selling
unregistered securities should
be a red alert for investors. Con
artists also frequently use the
promise of high commissions
to lure some insurance agents,
investment advisers, accountants
and lawyers who are not
registered to sell securities
into selling investments they
may know little about, such
as bogus limited partnerships
or promissory notes. Even
investment products such
as variable annuities can be
fraudulently sold to unsuitable
and unsuspecting investors by
people not trained as securities
professionals.
UNREGISTERED
INVESTMENT
PRODUCTS
It pays to remember that
legitimate investment products,
excluding stocks sold on national
exchanges, must be registered
with state officials before they
can be offered for sale to the
public. Con artists bypass this
requirement because they know
that stringent state registration
requirements protect investors
from their offerings of viatical
settlements, pay telephone
and ATM leasing contracts,
promissory notes, investment
trusts and other unregistered
securities that cannot stand
the scrutiny of the registration
process. Most unregistered
investments promise “limited
or no risk” and high returns. In
almost all cases, the only profits
go to the promoters of these
schemes and investors are left
holding the bag.
AFFINITY FRAUD
Con artists increasingly target
religious, ethnic, cultural and
professional groups. Some may
be members of the group or
pretend to be members in order
to gain trust. Con artists often
recruit a respected member
of a community or religious
congregation to promote their
schemes by convincing them
that a fraudulent investment is
legitimate. In many cases, even
these leaders become victims
of what turns out to be a Ponzi
scheme.
SENIOR
INVESTMENT FRAUD
Because they have built a
lifetime of savings, seniors
continue to face investment
fraud by con artists peddling
unsecured promissory notes,
viatical settlements, variable
annuities and other investments
that are either fraudulent or
unsuitable for them based on
their financial needs. Some
victims are switched out of
existing investments into
others just for additional
sales commissions. California
securities regulators recently
derailed a “living trust mill”
scam involving insurance agents
acting as investment advisers
who misled and illegally pushed
seniors to sell securities and
buy annuities. Before doing
business with any investment
professional, all investors should
check with the Oklahoma
Securities Commission to
determine whether the
individual is properly licensed
and if there have been any
complaints or disciplinary
problems.
INVESTMENT
SEMINARS
Promoters of unsuitable
investments increasingly seek
potential investors, particularly
seniors, by offering seminars,
many of them promising a
free meal along with “higher
returns and little or no risk.”
Unfortunately, in many of the
Continued next page
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2
3
4
5
6
Page 5
ORGWWW.INVESTEDOK.ORG TOP TEN FRAUD SCAMS
cases that securities regulators
see, it’s just the opposite:
high risk and no returns, just
disastrous losses.
INTERNET FRAUD:
PUMP and DUMP
SCAM
Securities fraud on the Internet
has taken an interesting and
dangerous turn. Increasing
complaints have been received
concerning “pump and dump”
cons using e-mail spam as the
pumping tool. Unsolicited
e-mails are sent over the Internet
that appear to be sent to you by
mistake. These e-mails contain
what appear to be factual insider
information favorable to the
value of the stock meant for a
friend or relation of the sender.
The inside info is false and the
sender holds the stock being
pumped up. Based on this false
information, the spammed buy
the stock sending the price
artificially up. Once the stock
rises in value, the con artist sells
their holdings and the price
of the stock drops leaving you
holding the bag.
UNSUITABLE
SALES
What might be a suitable
investment for one investor
might not be right for another.
Securities professionals must
know their customers’ financial
situation and refrain from
recommending investments that
they have reason to believe are
unsuitable. For example, variable
and equity indexed annuities
are often unsuitable for senior
citizens because of unreasonable
costs, fees and penalties for early
withdrawal. But sales agents
earn high commissions so they
do not always adhere to the
suitability standards – with dire
consequences for seniors.
OIL AND GAS
SCAMS
With the high price of oil
and ongoing instability in the
Middle East, NASAA members
are concerned that con artists
will dust off a variety of oil
and gas scams once prevalent
in the 1980s to lure investors
into unsuitable or fraudulent
investments, scams ranging from
leases in oil fields to unproven
technologies designed to convert
common substances into fuel.
In Oklahoma, regulators have
filed civil charges against a
Duncan-based company that
received money from investors in
six states for the recompilation
of one well that had been
depleted for years and another
well the company did not own.
The department has brought
administrative proceedings
against at least four other
companies for violations of
the registration and anti-fraud
provisions of securities laws
relating to a range of material
misstatements and omissions.
PRIME BANK
SCAMS
A favorite of con artists who
promise investors triple-digit
returns through access to the
investment portfolios of the
world’s elite banks. The negative
publicity attached to these
schemes has caused promoters in
recent cases to avoid explicitly
referring to “prime banks.” Now
it is common to avoid the term
altogether and underplay the
role of banks by referring to these
schemes as “risk free guaranteed
high yield instruments” or
something 7 equally deceptive.
8
9
10
WWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
Page 6
Matthew McClintock
In early 2003, Matthew McClintock
promoted himself to potential investors
as a day trader who would trade funds
aggressively in order to make quick profits.
He met most of his victims through online
dating services and after gaining their trust,
received substantial sums of money under
the ruse that he would make securities
transactions. However, he used some of
the funds to actively trade securities on
his personal account at AmeriTrade with
the remaining funds going for personal
expenses. McClintock was not registered to
transact business in this manner.
McClintock met a woman over the
Internet who lived in Tennessee. The two
became engaged and McClintock moved
in with her. She was a state employee
and was eligible for retirement in June
2005. McClintock urged her to take her
retirement in one lump sum; he convinced
her that he could invest that money for
her. In addition, he began teaching a day
trading course out of her home to her
friends.
The woman’s coworkers became suspicious
of him and eventually contacted the FBI.
When an agent informed the victim that
McClintock was out on bail for obtaining
money under false pretenses in Grady
County, and that the Oklahoma Securities
Commission had taken action against
him for selling unregistered securities and
committing fraud, she kicked him out. He
then attempted to partner with the ex-wife
of a bank president in order to funnel
money through her bank account. She is
now a witness for the case.
Currently he is serving a four-year
suspended sentence in Grady County
for obtaining services by fraud. A bench
warrant was issued for his arrest after
he failed to appear in May 2005 for a
probation violation and McClintock is
now being held in Tennessee on charges of
obtaining money under false pretenses. He
has waived extradition to Oklahoma, but it
is unclear when he will be transferred back
to the state.
Merl William
“Bill” Hickman, Sr.
Merl William
“Bill” Hickman, Jr.
This father and son team
swindled millions from mostly
retired and elderly investors
through their Shawnee-based insurance
company, the Hickman Agency.
The activities of the Hickmans came to
the attention of officials at the Oklahoma
Securities Commission during the summer
of 2003 when a soon-to-retire Tinker Air
Force Base employee called, skeptical of an
investment opportunity with the agency.
State officials seized the family’s assets and
shut down the business Dec. 17, 2003.
According to court records, approximately
160 investors have lost more than
$8 million through a Ponzi scheme.
Investors were told they had the
opportunity to receive a 20 percent return
on their investment with the Hickmans,
with the offer to receive monthly payments.
Once the civil case was filed and a receiver
was appointed, it became clear that the
Hickmans did not invest the funds, instead
they used them to pay for a lavish
lifestyle. Investigators found boats,
recreational vehicles, a Hummer, flat
screen, plasma televisions, tanning beds,
guns, stainless steel appliances and nearly
$1 million in jewelry. Additionally,
the Hickmans took trips to Las Vegas,
purchased land and funded home
remodeling projects.
Currently, Hickman Sr., is serving an eight-year
federal prison term to be followed by a
160-year state prison sentence.
Hickman Jr., is serving a five-year federal
prison term which will be followed by
a 10-year state prison sentence on local
conspiracy charges.
Both were ordered to pay approximately
$8.5 million in restitution at the federal
level.
Victims are expected to receive between
a five and 10-cent return on the dollar
following the liquidation of the Hickman
assets.
Oklahoma Fraud Cases continued next page
Page 7
Department
of Securities
The mission of the Oklahoma
Securities Commission is investor
protection through the administration and
enforcement of the Oklahoma Uniform
Securities Act of 2004, an act prohibiting
fraud in securities transactions and
requiring the registration of broker-dealers,
agents, investment advisers and investment
adviser representatives and the registration
of securities.
The duties of the Department of Securities
consist of receiving and processing
applications for registration or exemption of
securities, business opportunities, takeovers
and subdivided land offered in and/or from
the state of Oklahoma, including reviewing
the offering documents and sales material
to be used; receiving and processing
applications for licensing of broker-dealers,
agents, investment advisers and investment
adviser representatives; periodic on-site
examining of registrants for compliance
with the applicable acts; disseminating
information through public lectures,
programs, correspondence and the press,
so that professional groups and the public
at large may become better acquainted
with the requirements and provisions of
the acts subject to the jurisdiction of the
department; investigating complaints
concerning the offer and/or sale of
securities, business opportunities and
subdivided land; taking administrative
actions upon notice of violations of the
acts; taking civil action where necessary;
making criminal referrals to appropriate law
enforcement officials, and/or by assisting
in such prosecutions. The department
also receives filings of the final documents
for bonds, notes or other evidences of
indebtedness of any public trust.
From 2000 to mid-October 2004
Marsha Schubert of Crescent
accepted money from investors
through her company, Schubert and
Associates, under the pretense that she
would invest the funds as a day trader.
Of these funds, less than one percent was
invested. Schubert provided no authentic
monthly or quarterly statements to
investors, although she did provide false
statements to some investors.
Bank accounts with multiple names were
established in Crescent and Kingfisher.
More than $200 million flowed through
the accounts during the life of the scam.
Using a classic Ponzi scheme, payments
were made, purportedly generated through
investment activities while in truth,
these payments were made using other
investors’ money.
Victims were spread across Oklahoma,
Texas and Arkansas and included
teachers, physicians, bankers, farmers and
ranchers. Investors were obtained by word
of mouth and personal referrals.
Schubert, a registered stockbroker, is a
lifelong resident of Crescent and was
considered a model citizen. She was
married to Richard Schubert for 30 years
and they had three children. He has since
divorced her.
While her lifestyle remained modest,
Schubert paid off a home mortgage,
purchased mobile homes for her children,
buildings for her businesses, including a
knick-knack store called Kattails, and a
luxury condominium in Branson, Mo.
In May 2005, Schubert pleaded guilty on
all state and federal charges against her.
In September 2005, Schubert was
sentenced to 10 years in federal prison
and 25 years in state prison, to be served
concurrently. She turned herself over to
federal custody Sept. 30, 2005.
Marsha Schubert
Page 8
WWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
Mark A. Wingo
Between 1992 and 1999, Tulsa
resident Mark A. Wingo filed
for bankruptcy protection on
four separate occasions and accumulated
numerous tax liens and judgments
against him.
Wingo was convicted in 1988 of two state
counts relating to motor vehicle larceny.
Wingo received a five year sentence
of which he served approximately six
months. He was on probation for the
remainder of his sentence.
In 1995, Wingo was indicted on federal
charges relating to possession of a firearm
after a felony conviction for which he
received a sentence of 20 months in
prison and three years’ supervised release.
While under supervised release, Wingo
was arrested on bogus check charges
in connection with more than one
motor vehicle purchase. His supervised
release status was eventually revoked
and he began serving time in a federal
correctional facility in 1999. While
incarcerated, Wingo faced another charge
for uttering a forged security and a charge
for escape. He pled guilty to the two new
charges and was sentenced to 40 months
in prison, with three years supervised
release. He was released from prison in
June of 2005, subject to the supervision of
a federal probation officer.
While under supervised release, Wingo
offered and sold shares of stock in
Airgonomics, Inc., an Oklahoma
corporation formed by Wingo in July of
2007. The purported business plan of
Airgonomics was to develop technology
to power or charge the batteries of hybrid
gasoline/electric cars. Wingo sold the
stock for $75 per share.
Fearing that potential investors would not
invest with him, Wingo did not disclose
his personal financial history or the fact
that he is a convicted felon. Wingo did
represent that he had filed for a patent
for his technology and provided potential
investors with a purported patent
application filing number. Wingo also
disclosed the name of an attorney with
whom he claimed to be working with to
obtain the patent. In addition, Wingo
represented that he was working on the
development of the technology with at
least two engineers associated with the
Engineering Department at Oklahoma
State University.
At least one Oklahoma resident invested
in Airgonomics without verifying any of
the information provided by Wingo. Only
after making the investment and upon
learning of Wingo’s criminal history did
the investor conduct any due diligence
regarding Airgonomics or Wingo. The
investor contacted representatives of
Oklahoma State University (OSU) only
to learn that there was no agreement
or relationship between Airgonomics
and any OSU professor. The investor
contacted the attorney referenced by
Wingo and discovered that the attorney
had met with Wingo only once, that
the attorney never prepared a patent
application on behalf of Airgonomics, and
that the number referenced by Wingo was
merely the law firm’s internal case number
for the Airgonomics matter and not a
patent filing number.
Wingo did not use the investment
proceeds as he represented to
the investors.
Phillip Raglin
Phillip Raglin and Joe Layne are
in their early 20s, both graduates
of Wagoner High School in
Wagoner, Oklahoma. Neither Raglin nor
Layne graduated from college. Raglin
was a popular guy, considered by many
in the community to be extremely
bright. Layne, Raglin’s sidekick, is the
son of a local Baptist preacher. At the
time in question, Layne’s father was the
president of the Wagoner School Board.
Together, using family ties, friends and
other relationships, Raglin and Layne
orchestrated a fraudulent investment
scheme through meetings in potential
investors’ homes and offices or in local
restaurants. The two collected in excess
of $1,000,000 over a very short period of
time from approximately 300 residents
of northeast Oklahoma, Arkansas and
Missouri.
The basis of the fraudulent scheme was a
“unique” investment formula developed
by Raglin for which a “patent was
pending.” Raglin talked of earnings of
3-5% per day and touted the formula as
eliminating the greed and fear associated
with investing in the securities markets.
The formula automatically sold a stock
position when the investment reached
a return of 5% in a day or when a loss
of a minimal programmed percentage
occurred. Raglin claimed he started
investing with $150,000 in “business
Page 9
ORGWWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
loans” used to fund his activities which
originally came from large student loans.
Raglin boasted that he earned returns of
80% per month on that original $150,000
by using his “unique” investment
formula.
Raglin Industries, LLC was formed
to share the wealth with those who
do not have a net worth of at least
$1,000,000 and an annual income of
at least $200,000 as a single person
or an annual joint income of at least
$300,000. Raglin and Layne offered and
sold memberships in Raglin Industries to
investors with promises of 30% interest
on their investments and a guaranteed
share in company profits. Raglin boasted
that a $100 investment would grow to
$2,300 after one year, $54,000 at the end
of year 2, and $1.2 million at the end of
year 3, if all profits were reinvested in
Raglin Industries rather than taken as
cash distributions. Raglin told stories
of investing six days a week in the
securities markets in China, Australia
and Panama, and the purchase of Subway
franchises in Estonia and Bulgaria. The
initial members of Raglin Industries were
also tempted by additional “benefits of
membership”: health, dental and vision
insurance for the member’s family with a
maximum premium of $300 and reduced
co-payments, a destination vacation club,
mortgage services with interest rates
below prime, college scholarships and
special discounts on purchases.
Sound too good to be true? It was!
There was no “unique” investment
formula or strategy. There was no patent
application pending. There were no
80% per month investment returns.
There was no office and there were no
employees of Raglin Industries, LLC.
There were no investments made in the
securities markets in the United States,
China, Australia or Panama. Rather, the
investment proceeds were used to build
a home for Raglin and his new bride; to
purchase several expensive vehicles, at
least one of which was customized with
a computer, television and stereo at a
cost of $60,000; to fund travel expenses;
to pay ordinary and extraordinary living
expenses; and to pay token returns to
prior investors.
Travis Winnett
Over a period of seven months in
late 2006 and early 2007, Travis
Winnett, formerly of Catoosa,
Oklahoma, and now of Neosho, Missouri,
defrauded approximately ten Oklahoma
and Texas citizens out of $700,000.
Winnett offered and sold securities as
part of two “Loan Financing Savings
Plans” advertised by an entity called
American Liberty Insurance & Financial
Services. The investors’ monies
were to be held in an interest bearing
account until used to fund life insurance
premiums. Winnett falsely advertised
that the savings plans were offered “in
cooperation with” a bank located in
Claremore, Oklahoma. In order to
bolster the legitimacy of the purported
investment opportunity, Winnett
included the bank logo and the name
and telephone number of a customer
service representative of the bank on the
advertising materials.
Winnett was not registered in any
capacity under Oklahoma’s securities
laws. Winnett, an Oklahoma licensed
insurance agent at the time, offered a
“5x8” savings plan and a “6x10” plan.
Winnett’s “5x8” plan purportedly paid
simple interest of 8% per year for each
of five years. The “6x10” savings plan
purportedly paid simple interest of 10%
for each of six years plus a 15% “end-of-contract”
bonus for an initial deposit of
$25,000 and a 30% bonus for an initial
deposit of $50,000 or more. Winnett
represented to each investor that his/her
money would be deposited into an FDIC-insured
savings account at the Claremore
bank and that the money would be
insured for up to $100,000.
Investors were directed to make their
checks payable to Lighthouse Marketing
Incorporated, not American Liberty
Insurance & Financial Services or the
Claremore bank. Winnett deposited
over $700,000 of investors’ monies into
a single non-interest bearing account
that he controlled under the name of
Lighthouse Marketing. Separate bank
accounts were not established in the
name of each investor. Winnett used
the Lighthouse Marketing account solely
to pay his personal expenses. None of
the investors’ monies was invested and
Winnett did not otherwise have the
financial ability to pay the promised
interest and/or bonuses to his investors.
Various insurance agents recommended
the savings plan investments to their
clients – clients with whom they had
long-term business relationships.
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WWW.INVESTEDOK.ORG OKLAHOMA FRAUD CASES
Neither the insurance agents making
the recommendations nor their clients
performed any due diligence on the
investment opportunity before any money
was invested with Winnett.
• The insurance agents and their
investing clients did not question the
promised 8% and 10% interest rates at
a time when banks were paying less
on certificates of deposit or
savings accounts.
• No one called the Claremore bank to
confirm a business relationship between
the bank and American Liberty
Insurance & Financial Services or
Travis Winnett.
• No one called the Claremore bank to
confirm whether a bank account would
be established in the individual
investor’s name.
• No one questioned the fact that their
checks were to be made payable to a
third entity not previously mentioned in
the advertising materials.
• No one questioned that the other
party to the investment agreement was
yet another previously undisclosed
entity, American Liberty Funding LLC.
“Investigate Before You Invest”
Knowledge is power. The following checklist is designed as a quick reference to
help investors ask the right questions before making an investment. Once your
questions have been answered, contact your state securities regulator or other
appropriate state agency, to verify the information.
Remember: The time to ask questions is before you invest
your hard-earned money.
Seller/Agent Information
Seller/Agent Name:
Company/Business Name:
Company/Business Address:
Phone Number:
Today’s Date:
1. What products are you offering? (check all that apply)
q Annuities
q Living Trust
q Accounting
2. Who regulates or licenses this product or service?
3. How does this product meet my investment objectives?
4. What are the risks?
5. What written information will I receive about this investment
before making a decision?
q Prospectus
q Most Recent Annual Report
q Recent News Releases
6. What license(s) do you hold that authorizes you to sell this product or service?
LICENSE TYPE
Insurance License
Securities License
Investment Advisor
State Bar License
Accountant License
Real Estate License
Other
q Securities
q Estate Planning
q Other
q Offering Memorandum
q Most Recent Quarterly or Interim Report
q Research Reports
LICENSE INFORMATION
License No:
CRD No:
License No:
q Corporation q SEC
State Bar No:
CPA No:
DRE License No:
Explain:
WWW.INVESTEDOK.ORG HOW TO SPOT A CON ARTIST
Rule 1:
Con Artists Like to Blend In
Rule 2:
Con Artists Dress for Success
Rule 3:
Con Artists Often Push Poorly
Understood or Little-Known Products
Rule 4:
Con Artists Bring Out the Worst in
You
Rule 5:
Con Artists Are Fair-weather Friends
Rule 6:
For Every Silver Lining,
There Is a Cloud
Rule 7:
Don’t be Afraid to “Sleep on It.”
Trust your inner voice if
you hear claims like these:
— “I just got a hot tip from an inside
source that this stock will go through the
roof.”
— “Your return is guaranteed. There’s no
way you can lose money.”
— “Gotta get in on the ground floor now
or you’ll be left out in the cold. In fact,
we’ll send a messenger over tomorrow
to pick up your check.” (Con artists
often use this device to avoid federal
mail fraud charges.)
— “This deal is so great, I invested in it
myself.”
— “If this doesn’t perform as I just said,
we’ll refund your money, no questions
asked.”
— “Everyone else that invested in this did
very well.”
Be especially careful if the
salesperson denies that risk
exists
Con artists usually are not very good
at answering important questions.
Watch out if the salesperson is
reluctant to provide information
on the following:
— The background, educational history
and work experience of the deal’s
promoters, principals or general
partners;
— Information on whether your investment
monies will be segregated from other
funds available to the business;
— Written information on the business’
financial condition, such as a balance
sheet and bank references;
— The prior track record of the business
and its principals;
— The salesperson’s name, where he or
she is calling from, who he or she works
for, his or her background and what
commission or other compensation he or
she will receive;
— The salesperson’s connection with the
venture and any affiliates.
In addition, be wary if the salesperson
doesn’t ask you questions about your
past investment experience and your
ability to withstand risk. Even if the
salesperson does ask a few related
questions, take heed if you get the
sense that he or she is merely going
through the motions.
Be especially careful
if the salesperson denies
that risk exists.
Page 11
WWW.INVESTEDOK.ORG
HOW TO AVOID BECOMING A VICTIM
Contact your state or provincial
securities regulator to see if the
investment vehicle and the person
selling it are registered. Your state or
provincial securities regulator will also
be able to tell you if the salesperson has
a disciplinary history, that is, whether
any civil, criminal or administrative
proceedings have been brought against
him or her.
Deal only with financial advisers,
broker-dealers or financial institutions
having a proven track record.
Ask for written information
on the investment product and the
business. Such information, including
financial data on the company and
the risks involved in the investment,
is contained in a prospectus. Read it
carefully.
Don’t take everything you hear
or read at face value. Ask questions
if you don’t understand and do some
sleuthing for yourself. If you need
help in evaluating the investment, go
to someone independent whom you
can trust such as an attorney or an
accountant.
Contact your local Better Business
Bureau to see if any complaints
have been filed against the venture’s
promoters or principals.
Steer clear of investments touted
with no downside or risk.
Avoiding
being hurt by a con artist
is as easy as
doing your homework–
before you invest.
Page 12
WWW.INVESTEDOK.ORG TIPS FOR SENIORS
Source: National American Securities Administrators Association
1
Don’t be a courtesy victim.
Con artists will not hesitate to exploit your
good manners. Save your good manners for
friends and family members, not strangers
looking for a quick buck!
2
Check out strangers
touting strange deals.
Trusting strangers is a mistake anyone
can make when it comes to their per-sonal
finances. Say “no” to any investment
professional who presses you to make an
immediate decision, giving you no opportu-nity
to check out the salesperson, firm and
the investment opportunity itself. Exten-sive
background information on investment
salespeople and firms is available from the
Central Registration Depository (CRD)
files available from the Oklahoma Securi-ties
Commission.
3
Always stay in
charge of your money.
Beware of anyone who suggests invest-ing
your money into something you don’t
understand or who urges that you leave
everything in his or her hands.
4
Don’t judge
a book by its cover.
Successful con artists sound and look
extremely professional and have the ability
to make even the flimsiest investment deal
sound as safe and sound as putting money
in the bank. The sound of a voice, particu-larly
on the phone, has no bearing on the
soundness of an investment opportunity.
5
Watch out for salespeople
who prey on your fears.
Con artists know that you worry about out-living
your savings or seeing your financial
resources vanish overnight as the result of
a catastrophic event, such as a costly hospital-ization.
Fear can cloud your good judgment.
An investment that is right for you will
make sense because you understand it and
feel comfortable with the risk involved.
6
Don’t compound tragedy
with rash financial decisions.
The death or hospitalization of a spouse
has many sad consequences - financial
fraud shouldn’t be one of them. Ask a con
artist to describe his ideal victim and you
are likely to hear the following two words:
“elderly widow.” If you find yourself sud-denly
in charge of your own finances, get
the facts before you make any decisions.
Local libraries and universities may offer
classes and information on investing. Talk
to friends, family, trade organizations and
state or provincial securities regulators for
advice. An insurance settlement makes you
an ideal target for fraud. Arm yourself with
information and your confidence will send
con men running.
7
Monitor your investments
and ask tough questions.
Don’t compound the mistake of trusting an
unscrupulous investment professional or
outright con artist by failing to keep an eye
on the progress of your investment. Insist
on regular written reports. Look for signs of
excessive or unauthorized trading of your
funds. Don’t let a false sense of friendship
or trust keep you from demanding a routine
statement of your accounts.
8
Look for trouble
retrieving your principal
or cashing out profits.
If a stockbroker, financial planner or other
individual with whom you have invested
stalls you when you want to pull out your
principal or profits; you have uncovered
someone who wants to cheat you. Some
investments have periods when you cannot
withdraw your funds, but you must be made
aware of these restrictions before you invest.
9
Don’t let embarrassment or
fear keep you from reporting
investment fraud or abuse.
Con artists know that you might hesitate
to report that you have been victimized in
financial schemes out of embarrassment or
fear. Con artists prey on your sensitivities
and count on these fears, preventing or
delaying the point at which authorities are
notified of a scam. Every day that you delay
reporting fraud or abuse is one more day
that the con artist is spending your money
and finding new victims.
10
Beware of “reload” scams.
If you are already the victim of an invest-ment
scam, don’t compound the damage
by letting con artists “reload” your assets.
Con artists know you have a finite amount
of money. Faced with a loss of funds, some
seniors who have been victimized once will
go along with another scheme in which the
con artists promise to make good on the
original funds lost and possibly even gener-ate
new returns beyond those originally
promised. Making up lost financial ground
is understandable, but often the result is
that you lose whatever savings you had left
in the wake of the initial scam.
Page 13
WWW.INVESTEDOK.ORG
INVESTOR EDUCATION
RESOURCES
• Oklahoma Securities Commission (OSC)
Suite 860, First National Center
120 N. Robinson
Oklahoma City, OK 73102
Phone: (405) 280-7700
Fax: (405) 280-7742
www.securities.ok.gov
• Invest Ed®
OSC Investor Education Program
Phone: (405) 280-7700
www.investedok.org
OTHER RESOURCES • AARP
Phone: (888) 687-2277
www.aarp.org
• Investor Protection Trust (IPT)
Suite 300
919 Eighteenth Street NW
Washington, DC 20006-5517
Email: iptinfo@investorprotection.org
www.investorprotection.org
• Financial Industry Regulatory Authority (FINRA)
Phone: (504) 522-6527
Fax: (504) 522-4077
District 5: Alabama, Arkansas, Louisiana,
Mississippi, Oklahoma and Tennessee
www.finra.org
Page 14
®
WWW.INVESTEDOK.ORG
• The National Fraud Information Center (NFIC)
www.fraud.org
• National Futures Association (NFA)
Phone: (212) 608-8660
www.nfa.futures.org
• The National White Collar Crime Center (NW3C)
10900 Nuckols Road, Suite 325
Glen Allen, VA 23060
www.nw3c.org
• North American Securities Administrators Association
Phone: (202) 737-0900
www.nasaa.org
• Securities Investor Protection Corporation (SIPC)
Phone: (202) 371-8300
www.sipc.org
• Securities and Exchange Commission (SEC)
Phone: 1-800-732-0330
Complaint Center: 1-202-551-6551
Investor Education Publications: www.sec.gov/investor/pubs.html
www.sec.gov
• Better Business Bureau
BBB of Central Oklahoma
Phone: (405) 239-6081
Fax: (405) 235-5891
Email: info@oklahomacity.bbb.org
www.oklahomacity.bbb.org
OTHER RESOURCES
Page 15
WWW.INVESTEDOK.ORG
Page 16
1. Which of the following phrases should raise your concern
about an investment?
a. High rate of return
b. Risk-free
c. Your investment is guaranteed against loss
d. You must invest now
e. All of the above
2. Securities laws protect investors by requiring companies to:
a. Show profits before they can sell stock
b. Provide investors with specific information
about the company
c. Pay dividends
d. Repay investors who have lost money
3. A fellow book club member tells you about an investment
opportunity that has earned returns of 20% during the past
year. Your investments have been performing poorly and you’re
interested in earning higher returns. This person is your friend and
you trust them. What should you do?
a. Ask your friend for more information about the
investment so that you can understand the risks before
you make a decision
b. Invest only a small amount to see how things go before
making a larger investment
c. Call your securities regulator to see if the investment
has been registered or is properly exempted for sale
d. a and c
4. Which of the following should you rely upon when making an
investment decision?
a. Testimonials of other investors
b. Advertisements and news stories in the media or
on the Internet
c. Technical data that you don’t really understand
d. Information filed with your securities regulator
5. Ways to protect yourself from investment fraud include:
a. Read all disclosure documents about an investment
b. Seek advice from an independent and objective source
c. Be skeptical and ask questions
d. Never write the check for an investment in the name
of your salesperson
e. All of the above
6. Which of the following are frequently used to defraud
the public?
a. Short-term promissory notes
b. Prime bank investments
c. Offshore investments to avoid taxes
d. Nigerian advance fee letters
e. All of the above
7. The role of government securities regulators is to:
a. Sell shares to investors
b. Act as an association for securities dealers and advisers
c. Regulate securities markets, the investment industry
and protect investors
d. All of the above
8. An investment is likely to be legitimate if:
a. The promotional materials and company Web site look
professional
b. The company has a prestigious office location
c. Other investors are receiving quick up-front returns
d. The company has an official-sounding name
e. None of the above
9. Who insures you against investment losses?
a. No one; this is the risk you take when you invest
b. My securities regulator
c. The company selling the investment
d. The Securities Investor Protection Corporation (SIPC)
in United States or the Canadian Investor Protection
Fund (CIPF) in Canada
AWARENESS QUIZ
Answer Key
1. E; 2. B; 3. D; 4. D; 5. E; 6. E; 7. C; 8. E; 9. A
Approximately 90 percent of all inquiries and
complaints made to or by the Oklahoma Securities
Commission became active enforcement cases.
More than 100 inquiries and complaints are
received annually. All cases are investigated for
securities fraud.
www.investedok.org
WWW. INVESTEDOK.ORG
All programs are made possible by the Oklahoma Securities Commission and are produced
by the University of Oklahoma Outreach, College of Continuing Education.
Education is Protection